Note 5 - Commitments and Contingencies

3 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

5

.     

Commitments

and Contingencies

Financial Covenants

Effective

May 15, 2017,

the Company entered into a Sixth Amended and Restated Technology License and Escrow Agreement with CBR Systems, Inc. which modified the financial covenant that the Company must meet in order to avoid an event of default. The Company must maintain a cash balance and short-term investments net of debt or borrowed funds that are payable within

one

year of

not

less than

$2,000,000.

The Company was in compliance with this financial covenant as of

September 30, 2017.

Warranty

The Company

offers a warranty on all of its non-disposable products of

one

to

two

years. The Company warrants disposable products through their expiration date. The Company periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

The warranty liability is included in other current liabilitie

s in the unaudited balance sheets. The change in the warranty liability for the

three

months ended

September 30, 2017

is summarized in the following table:

Balance at July 1, 2017	$	588,000
Warranties issued during the period		40,000
Settlements made during the period		(297,000	)
Changes in liability for pre-existing warranties during the period		(4,000	)
Balance at September 30, 2017	$	327,000

Contingency

In fiscal

2016,

the Company signed an engagement letter with a strategic consulting firm. Included in the engagement letter was a success fee due upon the successful conclusion of certain strategic

transactions. On

May 4, 2017,

a lawsuit was filed against the Company and its CEO by the consulting firm as the consulting firm argues that it is owed a transaction fee of

$1,000,000

under the terms of the engagement letter due to the conversion of the Boyalife debentures in

August 2016.

In

October 2017,

to streamline the case and without acknowledging any liability, the Company deposited

$1,000,000

with the Court and the consulting firm is in the process of dismissing the Company’s CEO from the case, without liability. The Company intends to defend the lawsuit vigorously and

no

accrual has been recorded for this contingent liability as of

September 30, 2017.